2 Financial Sector Stocks With Recent Intensive Insider Selling

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 |  Includes: AXP, FNGN
by: Markus Aarnio

The financial sector has been the best-performing group in one year performance with a gain of 34.6%.

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In this article, I will feature two financial sector companies that have seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

1. American Express Company (NYSE:AXP) provides charge and credit payment card products and travel-related services to customers worldwide.

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Insider selling by insider (last 30 days)

  • Douglas Buckminster sold 91,160 shares on June 5 and currently controls 66,298 shares or less than 0.1% of the company. Douglas Buckminster has been President, International Consumer and Global Network Services since February 2012.
  • Edward Gilligan sold 415,646 shares on June 3 and currently holds 175,581 shares and 85,128 options or less than 0.1% of the company. Edward Gilligan is Vice Chairman, American Express Company.
  • Kenneth Chenault sold 471,808 shares on May 30 and currently holds 664,339 shares or less than 0.1% of the company. Kenneth Chenault is Chairman and Chief Executive Officer, American Express Company, April 2001 to present.

Insider selling by calendar month

Here is a table of American Express Company's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 506,806 0
May 2013 942,309 0
April 2013 391,939 0
March 2013 51,013 0
February 2013 1,027,459 0
January 2013 873,589 0
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There have been 3,793,115 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on April 17 with the following highlights:

Revenue $7.9 billion
Net income $1.3 billion
Cash $28.0 billion
Debt $59.7 billion
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Competition

American Express Company's competitors include Discover Financial Services (NYSE:DFS), MasterCard (NYSE:MA) and Visa (NYSE:V). Here is a table comparing these companies.

Company AXP DFS MA V
Market Cap: 82.67B 23.24B 69.63B 119.58B
Employees: 63,500 13,009 7,500 8,500
Qtrly Rev Growth (yoy): 0.03 0.22 0.08 0.15
Revenue: 29.80B 6.92B 7.54B 11.10B
Gross Margin: 0.76 0.96 1.00 0.96
EBITDA: N/A N/A 4.30B 7.04B
Operating Margin: 0.23 0.59 0.54 0.60
Net Income: 4.46B 2.34B 2.84B 2.38B
EPS: 3.96 4.57 22.80 3.56
P/E: 19.00 10.35 25.13 51.68
PEG (5 yr expected): 1.28 1.26 1.27 1.30
P/S: 2.72 3.33 9.19 10.70
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American Express has the lowest P/S ratio among these four companies.

My analysis

There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 0.10%. There are 11 analyst buy ratings, 14 neutral ratings and three sell ratings with an average target price of $73.61. The stock is trading at a P/E ratio of 19.00 and a forward P/E ratio of 14.05. The company has a book value of $17.55 per share and the stock has a dividend yield of 1.24%. The stock has a $65 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $65 target price. I would place a stop loss at $79, which is the 14-year high. The three main reasons for the proposed short entry are bearish analyst target prices, bearish Point and Figure chart and the intensive insider selling activity.

2. Financial Engines (NASDAQ:FNGN) provides independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans.

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Insider selling by insider (last 30 days)

  • Garry Hallee sold 20,000 shares on June 3-24 pursuant to a 10b5-1 trading plan. Garry Hallee currently controls 124,990 shares and 49,640 options or 0.4% of the company. Garry Hallee has served as Executive Vice President of Technology and Service Delivery since December 2009.
  • Christopher Jones sold 24,000 shares on May 28 - June 21 pursuant to a 10b5-1 trading plan. Christopher Jones currently holds 86,562 shares and 110,186 options or 0.4% of the company. Christopher Jones has served as Executive Vice President, Investment Management and Chief Investment Officer since January 2006.
  • Jeffrey Maggioncalda sold 30,000 shares on June 6-20 pursuant to a 10b5-1 trading plan. Jeffrey Maggioncalda currently controls 265,655 shares and 495,439 options or 1.6% of the company. Jeffrey Maggioncalda has served as Chief Executive Officer since November 2012.
  • Anne Tuttle sold 4,500 shares on June 18 pursuant to a 10b5-1 trading plan. Anne Tuttle currently holds 6,278 shares and 13,000 options or less than 0.1% of the company. Anne Tuttle has served as Executive Vice President, General Counsel and Secretary since March 2009.
  • Kelly O'Donnell sold 2,615 shares on May 28 - June 12 pursuant to a 10b5-1 trading plan. Kelly O'Donnell currently holds 9,600 shares and 7,500 options or less than 0.1% of the company. Kelly O'Donnell has served as Executive Vice President of Marketing since January 2013.
  • Raymond Sims sold 15,000 shares on June 3-12 pursuant to a 10b5-1 trading plan. Raymond Sims currently holds 7,127 shares and 47,485 options or 0.1% of the company. Raymond Sims has served as Executive Vice President and Chief Financial Officer since August 1999.
  • Mary Lee Sharp sold 729 shares on June 7 pursuant to a 10b5-1 trading plan. Mary Lee Sharp currently holds 26,605 options or less than 0.1% of the company. Mary Lee Sharp has served as Executive Vice President of Human Resources since January 2012.
  • Lawrence Raffone sold 7,500 shares on June 3 pursuant to a 10b5-1 trading plan. Lawrence Raffone currently holds 41,615 shares or less than 0.1% of the company. Lawrence Raffone has served as President since November 2012.

Insider selling by calendar month

Here is a table of Financial Engines' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 96,229 0
May 2013 258,036 0
April 2013 116,724 0
March 2013 149,312 0
February 2013 216,229 0
January 2013 96,078 0
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There have been 932,608 shares sold and zero shares purchased by the insiders this year.

Financials

The company reported the first-quarter financial results on May 7 with the following highlights:

Revenue $53.9 million
Net income $6.2 million
Cash $192.5 million
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Outlook

The company estimates that its 2013 revenue will be in the range of $230 million to $235 million, and its 2013 non-GAAP Adjusted EBITDA will be in the range of $73 million to $75 million.

Competition

Financial Engines operates in a competitive industry, with many investment advice providers competing for business from individual investors, financial advisors and institutional customers. Direct competitors who offer independent portfolio management and investment advisory services to plan participants in the workplace include Morningstar (NASDAQ:MORN), GuidedChoice and ProManage. Plan providers that offer directly competing portfolio management and investment advisory services to investors in the workplace include Fidelity and Bank of America Merrill Lynch.

My analysis

There have been eight different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. There are four analyst buy ratings, one neutral rating and zero sell ratings with an average target price of $40.67. The stock is trading at a P/E ratio of 109.60 and a forward P/E ratio of 54.47. The company has a book value of $5.75 per share and the stock has a dividend yield of 0.43%. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in AXP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.